Global Market Comments
April 17, 2025
Fiat Lux
Featured Trade:
(THE MAD HEDGE TRADERS & INVESTORS SUMMIT REPLAYS ARE UP)
(APRIL 16 BIWEEKLY STRATEGY WEBINAR Q&A),
(SPY), (SH), (SDS), (TLT), (MSTR), (GLD),
(GOLD), (SLV), (AGQ), (NEM)
Posts
Global Market Comments
March 25, 2025
Fiat Lux
Featured Trade:
(THE ULTRA BULL CASE FOR GOLD)
(GLD), (UGL), (GOLD), (NEM)
I am constantly barraged with emails from gold bugs who passionately argue that their beloved metal is trading at a tiny fraction of its true value and that the barbaric relic is really worth $5,000, $10,000, or even $50,000 an ounce (GLD).
They claim the move in the yellow metal we are seeing is only the beginning of a 30-fold rise in prices similar to what we saw from 1972 to 1979, when it leaped from $33 to $950.
To match the 1936 peak value, when the monetary base was collapsing, and the double top in 1979 when gold futures first tickled $950, the precious metal has to increase in value by eight times, or to $9,600 an ounce.
I am long-term bullish on gold, other precious metals, and virtually all commodities for that matter. But I am not that bullish. It makes my own one-year $5,000 prediction positively wimp-like by comparison.
The seven-year spike up in prices we saw in 1979, which found me in a very long line in Johannesburg, South Africa to unload my own Krugerrands, was triggered by a number of one-off events that will never be repeated.
Some 40 years’ worth of demand was unleashed all at once when Richard Nixon took the US off the gold standard and decriminalized private ownership in 1972. Inflation later peaked at around 20%.
Newly enriched sellers of oil had a strong historical affinity with gold. South Africa, the world's largest gold producer, was then a boycotted international pariah and teetering on the edge of disaster, threatening gold supplies. We are nowhere near the same geopolitical neighborhood today, and hence my more subdued forecast.
But then again, I could be wrong.
If you took all the gold in the world and melted it into a cube, it would only have 63 feet on a side. That includes all the yellow metal accumulated by the ancient Pharos of Egypt, mined by the Spanish in Latin America, and discovered by 49ers during the California gold rush. I‘m not counting all the gold sitting at the bottom of the ocean, sunk by storms and privateers.
Suffice it to say, there isn’t much of element 79 on the periodic chart (AU) around. Its value is in its scarcity.
The geopolitical outlook has also changed in favor of gold. China, Russia, and Iran have become large-scale accumulators to bypass international sanctions. Gold is also a depleting asset. Barrick Gold (GOLD) isn’t opening new mines at 15,000 feet in the Andes Mountains because they like the clear air.
The cost of gold mining equipment is also rising at four times the inflation rate. You know those tires on those huge Caterpillar 797 trucks? They cost $200,000 each, and there is a one-year waiting list.
All this makes the barbarous relic a strong “BUY” for me.
Do You Have any Retreads?
Global Market Comments
October 28, 2024
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or HERE IS YOUR POST-ELECTION PORTFOLIO
plus THE LAST SILVER BUBBLE)
(NVDA), (META), (CRM), (TLT), (JNK), (CCI), (DHI), (LEN), (PHM),
(GLD), (SLV), (NEM), (FXE), (FXB), (FXA), (TSLA), (JPM), (BAC), (GS)
Remember Y2K?
The world was supposed to end at midnight on December 31, 1999 because computers would be unable to cope with the turnover of the new millennium. I remember making presentations to big hedge funds, predicting that Y2K was a big nothing burger and, worst case, somebody’s toaster wouldn’t work.
I spent that New Year’s Eve with my kids at Disneyland in Orlando, watching one heck of a fireworks display. What happened the next morning? Even the toasters worked.
I think we are setting up for another Y2K outcome, except that this time, it’s the presidential election that has everyone in a tizzy.
The polls are tied at 48%-48% with a margin of error of 4%. In fact, for the last 50 years, the opinion polls have been wrong by an average of 3.4%. One side already has that 3.4% and probably more, plus all seven battleground states, but we won’t know for sure until November 6.
As an investment manager, it is not my job to pick a side or impose my view upon you but to deliver the best possible investment returns for my clients.
And let me tell you how.
Remember the Pandemic? Four years after the event, we now have the luxury of copious hard data. Out of 103,436,829 cases, some 1,203,648 Americans died, or 1.3%. But, the death rate in red states was much higher than in blue states.
For example, California suffered only 101,159 deaths out of a population of 39,128,162 for a death rate of 0.26%. Florida saw 86,850 deaths out of a population of 22,634,867 for a death rate of 0.38%. Deaths in Florida were 68% higher in the Sunshine State than in the Golden State.
Florida, in effect, traded lives for business profits. Florida also had a Typhoid Mary effect in that by staying open for spring breaks and vacations; it increased the death rates in surrounding red states.
Assume that half of those who died were voters and apply this math to the entire country, and Republicans lost 393,059 votes to the pandemic compared to only 268,935 for Democrats. Some 124,125 more Republican voters died than Democrats. Is 124,125 votes enough to decide this election?
Absolutely!
In the 2020 presidential election, Biden won the three battleground states of Georgia by the famous 11,779 votes, Arizona by 10,457 votes, and Nevada by 33,596 votes. That’s 33 electoral college votes right there out of 270 needed.
The opinion polls have missed these numbers by a mile because their algorithms don’t take the pandemic into consideration. They are counting dead voters, while the actual election polls only count live ones. I predict that the opinion polls will be spectacularly wrong….again.
Of course, these are back-of-the-matchbook ballpark calculations. I’ll leave it to some future aspiring PhD candidate to research his thesis with more precise figures. I have better things to do.
So, how do we make money off of all this? I have never seen investors so underweight and cautious going into a major risk event like this election. They have been scared out of the market by the media. Therefore, I expect the stock market to rise by 10% after the election, taking the S&P 500 as high as 6,400.
Let the great chase begin!
Here is your model portfolio for the rest of 2024.
(NVDA), (META), (CRM) – Underweight fund managers will chase this year’s best performers so they can look good at yearend. Similarly, they will dump their worst performers in the energy sector. So will individual investors for tax loss harvesting.
(TLT), (JNK), (CCI) – All interest rate plays make back recent losses as the threat of $10-$15 trillion in new borrowing by a future president, Trump, disappears.
(DHI), (LEN), (PHM) – There is no better interest rate play than new homebuilding. It’s tough to beat a structure shortage of 10 million homes.
(GLD), (SLV), (NEM) – Precious metals also do very well as they have less yield competition from other interest rate plays. These have become the principal savings vehicle for Chinese individuals.
(FXE), (FXB), (FXA) – A falling interest rate advantage for the US dollar means you want to buy all the currencies.
(JPM), (BAC), (GS) – Banks also do exceedingly well in a falling interest rate environment, and brokers and money managers will cash in on exploding stock market volume.
Also, on November 6, your toaster will probably still work. And I will never understand why the Center for Disease Control never accepted my application out of college. So, I went to Vietnam instead.
So far in October, we have gained a breathtaking +5.46%. My 2024 year-to-date performance is at an amazing+50.70%. The S&P 500 (SPY) is up +21.38% so far in 2024. My trailing one-year return reached a nosebleed +66.31. That brings my 16-year total return to +727.33%. My average annualized return has recovered to +52.58%.
I am remaining cautious with a 70% cash, a 20% long, and a 10% short. I maintained two longs in (GLD) and (JPM) that are well in the money. I sold short (TSLA) to take advantage of a massive 29% gain in two days off the back of blockbuster earnings.
Some 63 of my 70 round trips, or 90%, were profitable in 2023. Some 61 of 81 trades have been profitable so far in 2024, and several of those losses were really break evens. Some 16 out of the last 19 trade alerts were profitable. That is a success rate of +75.30%.
Try beating that anywhere.
New Home Sales Jumped 4.1% in September at 738,000 seasonally adjusted units on a signed contract basis. The median home price rose to 426,300. This despite a roller coaster month on interest rates, falling to 6.0% for the 30-year, then jumping back up to 7.0%.
Fusion is going Commercial in San Francisco, with a German company, Focused Energy, making a $65 million investment. The firm will draw heavily from staff from nearby Lawrence Livermore National Labs, which achieved a net energy gain for the first time in 2022. Focused Energy is one of eight companies given grants to accommodate a doubling of power demand by 2050. Commercial fusion will be the next big thing, where three soda cans of heavy hydrogen can power San Francisco for a day.
Money Market Funds See Massive Pre-Election Inflows, as investors see to avoid promised post-election violence. According to LSEG data, investors acquired a net $29.98 billion worth of money market funds during the week, posting their fourth weekly net purchase in five weeks. Personally, I think it is another Y2K moment.
Tesla Earnings Shock to the Upside, with both third-quarter profits and margins topping estimates. Elon Musk said that he expects 20% to 30% vehicle growth next year, sending the company's shares up 11% in post-market trading. The company still sees 2025 production of a cheaper model, maybe the Model 2. The Cybertruck has reached profitability for the first time and is reaching mass production. Tesla will see “slight growth” in deliveries this year. I am using the spike in the share price to take profits on my long to avoid election risk.
Apple iPhone Sales are Lagging, according to a leading analyst, with a drop in 10 million orders expected, down to 84 million units. The stock dropped 4% from an all-time high.
Boeing Reports $6 Billion Loss, a disastrous report from a dying company with awful management. This is going to be a very long-term workout. A strike resolution may market the bottom. Avoid (BAC) like a stalling airplane.
Newmont Mining Dives 7% after missing Wall Street expectations for third-quarter profit on Wednesday. Higher costs and lower production in Nevada took the shine away from a rise in total output. Newmont said that its costs rose due to planned maintenance at the Lihir project in Papua New Guinea — which it acquired following a $17 billion buyout of Newcrest — and higher expenditure for contract services across its portfolio. Buy (NEM) on dips.
McDonald's Kills Two in E.Coli Outbreak, linked to quarter pounders sold in Colorado and Nebraska. The stock dropped 10%. It’s clearly a supply chain problem. Given their vast size, with 45,000 stands in 100 countries, it’s amazing that this doesn’t happen more often. Avoid (MCD).
Bonds Plunge Anticipating a Trump Win, with the (TLT) down $10 from the recent high. If he does win, expect another $10 decline to $82. If Harris wins, expect a $10 rally. This is the best election trade out there.
Nvidia Tops $3.5 Trillion, as the shares hit a new all-time high at $144.45. It looks like it’s on a run to $150, then $160. Earnings are about to double when reported on November 20. Before then, investors will get some insight into demand for Nvidia’s newest Blackwell chips with earnings reports from big technology companies, including Microsoft (MSFT) coming at the end of this month. Buy (NVDA) on dips.
Hedge Funds Pour into Technology Stocks, such as semiconductors and hardware, at the fastest in five months amid the start of the third-quarter earnings season, according to Goldman Sachs on Friday. Outside the U.S., diverging reports from chipmaker Taiwan Semiconductor Manufacturing (TSM) and chipmaking equipment supplier ASML Holding (ASML) in opposite directions while investors await semiconductor companies such as Advanced Micro Devices (AMD) and Nvidia (NVDA) to unveil their earnings as they seek a trend. They are betting on a big post-election move-up.
My Ten-Year View
When we come out the other side of the recession, we will be perfectly poised to launch into my new American Golden Age or the next Roaring Twenties. The economy is decarbonizing, and technology hyper accelerating, creating enormous investment opportunities. The Dow Average will rise by 600% to 240,000 or more in the coming decade. The new America will be far more efficient and profitable than the old.
Dow 240,000, here we come!
On Monday, October 28 at 8:30 AM EST, the Dallas Fed Manufacturing Index is published.
On Tuesday, October 29 at 6:00 AM, the S&P Case Shiller National Home Price Index is out. We also get the US JOLTS Job Openings Report. Alphabet (GOOGL) and (AMD) report.
On Wednesday, October 30 at 11:00 AM, the ADP Employment Change Report is printed. (META) and (MSFT) report.
On Thursday, October 31 at 8:30 AM, the Weekly Jobless Claims are announced. We also get the US Core PCE Price Index. (AMZN) reports.
On Friday, November 1 at 8:30 AM, the October Nonfarm Payroll Report is announced. At 2:00 PM, the Baker Hughes Rig Count is printed.
As for me, with silver on fire once again and at 12-year highs, I thought I’d recall the last time a bubble popped for the white metal. I picked up this story from my late friend Mike Robertson, who ran the Dallas-based Robertson Wealth Management, one of the largest and most successful registered investment advisors in the country.
Mike is the last surviving silver broker to the Hunt Brothers, who in 1979-80 were major players in the run-up in the “poor man’s gold” from $11 to a staggering $50 an ounce in a very short time. At the peak, their aggregate position was thought to exceed 100 million ounces.
Nelson Bunker Hunt and William Herbert Hunt were the sons of the legendary HL Hunt, one of the original East Texas wildcatters and heirs to one of the largest Texas fortunes of the day. Shortly after President Richard Nixon took the US off the gold standard in 1971, the two brothers became deeply concerned about financial viability of the United States government. To protect their assets, they began accumulating silver through coins, bars, the silver refiner, Asarco, and even tea sets, and when it opened, silver contracts on the futures markets.
The brother’s interest in silver was well-known for years, and prices gradually rose. But when inflation soared into double digits, a giant spotlight was thrown upon them, and the race was on. Mike was then a junior broker at the Houston office of Bache & Co., in which the Hunts held a minority stake and handled a large part of their business. The turnover in silver contracts exploded. Mike confesses to waking up some mornings, turning on the radio to hear silver limit up, and then not bothering to go to work because they knew there would be no trades.
The price of silver ran up so high that it became a political problem. Several officials at the CFTC were rumored to be getting killed in their personal silver shorts. Eastman Kodak (EK), whose black and white film made them one of the largest silver consumers in the country, was thought to be borrowing silver from the Treasury to stay in business.
The Carter administration took a dim view of the Hunt Brothers’ activities, especially considering their funding of the ultra-conservative John Birch Society. The Feds viewed it as an attempt to undermine the US government. The proverbial sushi hit the fan.
The CFTC raised margin rates to 100%. The Hunts were accused of market manipulation and ordered to unwind their position. They were subpoenaed by Congress to testify about their motives. After a decade of litigation, Bunker received a lifetime ban from the commodities markets, a $10 million fine, and was forced into a Chapter 11 bankruptcy.
Mike saw commissions worth $14 million in today’s money go unpaid. In the end, he was only left with a Rolex watch, his broker’s license, and a silver Mercedes. He still ardently believes today that the Hunts got a raw deal and that their only crime was to be right about the long-term attractiveness of silver as an inflation hedge. Nelson made one of the greatest asset allocation calls of all time and was punished severely for it. There never was any intention to manipulate markets. As far as he knew, the Hunts never paid more than the $20 handle for silver and that all of the buying that took it up to $50 was nothing more than retail froth.
Through the lens of 20/20 hindsight, Mike views the entire experience as a morality tale, a warning of what happens when you step on the toes of the wrong people.
The white metal’s inflation-fighting qualities are still as true as ever, and it is only a matter of time before prices once again take another run to the upside.
Unfortunately, Mike won’t be participating in the next silver bubble. Suffering from morbid obesity, he died from a heart attack a decade ago.
Silver is Still a Great Inflation Hedge
Good Luck and Good Trading,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
October 21, 2024
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD or COMPLACENSE IS RUNNING RAMPANT)
(JPM), (TSLA), (AMZN), (FXA), (FXE), (FXB), (FXY), (NEM), (DHI), (NFLX), (AAPL), (GLD), (AGQ), (SLV), (AAPL), (NVDA), (MS), (CCJ). (VST), (AVGO), (ASML), (MU), (LRCX), (DHI), (PHM), (LEN), (CCJ), (VST), (CEG), (BWXT), (OKLO)
We are now nearly three months into an almost straight-up move in the stock market, and money managers everywhere are scratching their heads. We are now only 136 points or 2.32% from my yearend (SPX) target of 6,000, which is starting to look pretty conservative. The price-earnings multiple for the S&P 500 is now 21X, the Magnificent Seven 28X, and NVIDIA 65X.
I’ve seen all this before.
We are about as close to a perfect Goldilocks scenario as we can get. Interest rates and inflation are falling. A 3% GDP growth rate means the US has the strongest major economy and is the envy of the world. We have entered the euphoria stage of the current market move in almost all asset glasses. Gold (GLD) has gone up almost every day. Some big tech remains on fire. Energy prices are in free fall. Even bonds (TLT) are trying to put in a bottom.
Complacence is running rampant.
So, how the heck do we trade a market like this? You play the laggard trade.
The biggest risk to the gold trade is that it has gone up 40% in a year. So, what do you do? The response by traders has been to move into lagging silver (SLV) (AGQ), which has been on a tear since September.
Had enough with the Mag Seven? Then, rotate in the sub $1 trillion part of the market with Broadcom (AVGO), ASML Holdings NV (ASML), Micron Technology (MU), and Lam Research (LRCX).
Tired of watching your DH Horton (DHI) go up every day? Then, flip into smaller homebuilders like Pulte Homes (PHM) and Lennar (LEN).
And then there is the biggest laggard of all, the nuclear trade, which is just crawling out of a 40-year penalty box. With news that Amazon (AMZN) was planning to order up to eight Small Modular Reactors to power its AI efforts, all uranium plays continue to go ballistic. The proliferation of power-hungry data centers is driving the greatest growth of power needs since WWII and the Manhattan Project.
Fortunately, I got in early. This is a trend that could become the next NVIDIA, as the public stocks involved are coming off such a low base. I have personally interviewed the founders and examined Nuscale’s plans with a fine tooth come and consider them genius. The company is, far and away, the overwhelming leader in the sector. The puzzle for the pros who understand the technology is why it took so long. Buy (CCJ), (VST), (CEG), (BWXT), and (OKLO) on dips.
It's like everything is racing towards a key, even with an unknown outcome. There happens to be a big one coming up: the US presidential elections on November 6.
Speaking of elections, I took the time to participate in the first day of voting in Nevada on Saturday, October 19, at the Incline Village Public Library. I waited in line for two hours in a brisk and breezy 40 degrees. I wore my Marine Corps cap and Ukraine Army ID just to confuse people. Some got so tired of waiting in the cold that they went home, retrieved their mail-in ballots, and returned to the polls to drop them off.
I looked back on the line, and women outnumbered the men by three to one. Where did all these women come from? There used to be such a shortage of women at Lake Tahoe that it was impossible to get a date. Hunting, fishing, long-distance backpacking, and skiing weren’t used to attract such large numbers of the female gender. Maybe now they do? But now they’re driving up in Mercedes AMG’s and Range Rovers.
When I finally arrived at the front of the line, I was asked to sign an agreement with my finger, acknowledging that I knew it was illegal to vote twice. The poll worker noticed my ID. When I explained what it was in the Cyrillic alphabet, she burst into tears, apologized, and said she had goosebumps all over.
It was another blockbuster week, up over 6%. So far in October, we have gained +4.89%. My 2024 year-to-date performance is at +50.13%. The S&P 500 (SPY) is up +22.43% so far in 2024. My trailing one-year return reached a nosebleed +65.90. That brings my 16-year total return to +726.76%. My average annualized return has recovered to +52.56%.
With my Mad Hedge Market Timing Index at the 70 handles for the first time in five months, I am remaining cautious with a 70% cash and 30% long. I look for a small profit in (TSLA) to reduce risk. Two of my positions expired at their maximum profit point for (NEM) and (DHI) on Friday, October 18 options expiration.
Some 63 of my 70 round trips, or 90%, were profitable in 2023. Some 60 of 80 trades have been profitable so far in 2024, and several of those losses were really break-even. Some 16 out of the last 19 trade alerts were profitable. That is a success rate of +75.00%.
Try beating that anywhere.
Risk Adjusted Basis
Current Capital at Risk
Risk On
(TSLA) 11/$165-$175 call spread 10.00%
(JPM) 11/$195-$205 call spread 10.00%
(GLD) 11/230-$235 call spread 10.00%
Risk Off
NO POSITIONS 0.00%
Total Net Position 30.00%
Total Aggregate Position 30.00%
Netflix Soars on Blockbuster Earnings, up 11% at the opening on a 5 million gain in subscribers. The company posted earnings per share of $5.40 for the period ended Sept. 30, higher than the $5.12 LSEG consensus estimate.
Crucially, Netflix saw momentum in its ad-supported membership tier, which surged 35% quarter over quarter. The streaming wars are over, and (NFLX) won. Buy (NFLX) on dips.
Silver is Ready to Break Out to the Upside after a year-long-range trade. The white metal is a predictor of a healthy recovery and a solar rebound. It’s a long overdue catch-up with (GLD). Buy (AGQ) on dips.
Apple China Sales Jump 20% on the new iPhone 16 launch. Both Apple and Huawei's (HWT.UL) latest smartphones went on sale in China on Sept. 20, underscoring intensifying competition in the world's biggest smartphone market, where the U.S. firm has been losing market share in recent quarters to domestic rivals. Buy (AAPL) on dips.
Taiwan Semiconductor Soars on Spectacular Earnings, dragging up the rest of the chip sector with it. The world's largest contract chipmaker raised its expectation for annual revenue growth and said sales from AI chips would account for mid-teen percentage of its full-year revenue. U.S.-listed TSMC shares rose nearly 9%, and if gains hold, the company's market capitalization would cross $1 trillion. Buy (NVDA) on dips.
Weekly Jobless Claims Fall. Initial claims for state unemployment benefits dropped 19,000 last week to a seasonally adjusted 241,000 for the week ended Oct. 12, the Labor Department said on Thursday. Economists polled by Reuters had forecast 260,000 claims for the latest week. Claims jumped to more than a one-year high in the prior week, attributed to Helene, which devastated Florida and large swathes of the U.S. Southeast in late September.
Morgan Stanley Announces Blowout Earnings, fueling a 32% profit jump for the third quarter. Revenue from the trading business rose 13%. That followed gains recorded by its biggest rivals as the market business lifted fortunes across the industry, and a steady rebound in investment banking fees increased dealmaking. The wealth unit generated revenue of $7.27 billion, higher than analysts’ expectations, with $64 billion in net new assets. The unit boosted its pretax margin to 28%, driven by growth in fee-based assets. Buy (MS) on dips.
Global EV Sales Up 30% in September, with the largest gains in China. Gains in the U.S. market have been lagging in anticipation of the Nov. 5 election. Chinese carmakers are seeking to grow their sales in the EU despite import duties of up to 45% and amid cooling global demand for electric cars. Chinese and European automakers were going head-to-head at the Paris Car Show on Monday. Buy (TSLA) on dips.
Dollar Hits Two Month High on rising US interest rates. Ten-year US Treasuries have risen from 3.55% to 4.12% since the September Nonfarm Payroll Report. A string of U.S. data has shown the economy to be resilient and slowing only modestly, while inflation in September rose slightly more than expected, leading traders to trim bets on large rate cuts from the Fed. Buy all foreign currencies on dips (FXA), (FXE), (FXB), (FXY).
S&P 500 Value Gain Hits $50 Trillion, since the 1982 bottom, which I remember well and is up 50X. The index hit a record high Wednesday and is trading Thursday at around 5770, up 21% so far in 2024. The index’s value is up sixfold since it stood at $8 trillion at year-end 2008, near the depth of the bear market during the financial crisis.
JP Morgan Delivers Blowout Earnings. Its stock, trading around $223, was on course for its biggest daily percentage gain in 1-1/2 years.
(JPM)'s investment-banking fees surged 31%, doubling guidance of 15% last month. Equities propelled trading revenue up 8%, exceeding an earlier 2% forecast. These earnings are consistent with the soft-landing narrative of modest U.S. economic growth. Buy (JPM) on dips.
My Ten-Year View
When we come out the other side of the recession, we will be perfectly poised to launch into my new American Golden Age or the next Roaring Twenties. The economy is decarbonizing, and technology hyper accelerating, creating enormous investment opportunities. The Dow Average will rise by 600% to 240,000 or more in the coming decade. The new America will be far more efficient and profitable than the old.
Dow 240,000, here we come!
On Monday, October 21 at 8:30 AM EST, nothing of note takes place is out.
On Tuesday, October 22 at 6:00 AM, the Richmond Fed Manufacturing Index is out.
On Wednesday, October 23 at 11:00 AM, the Existing Home Sales is printed.
On Thursday, October 24 at 8:30 AM, the Weekly Jobless Claims are announced. We also get New Homes Sales.
On Friday, October 25 at 8:30 AM, the US Durable Goods Orders are announced. At 2:00 PM, the Baker Hughes Rig Count is printed.
As for me, I am headed out for early voting in Nevada this morning. It’s been a year since I came back from Ukraine badly wounded, so I thought I would recall my recollections from that time.
You know you’re headed into a war zone the moment you board the train in Krakow, Poland. There are only women and children headed for Kiev, plus a few old men like me. Men of military age have been barred from leaving the country since the Russians Invaded. That leaves about 8 million to travel to Ukraine from Western Europe to visit spouses and loved ones.
After a 15-hour train ride, I arrived at Kiev’s magnificent Art Deco station. I was met by my translator and guide, Alicia, who escorted me to the city’s finest hotel, the Premier Palace on T. Shevchenka Blvd. The hotel, built in 1909, is an important historic site as it was where the Czarist general surrendered Kiev to the Bolsheviks in 1919. No one in the hotel could tell me what happened to the general afterward.
Staying in the best hotel in a city run by Oligarchs does have its distractions. Thanks to the war, occupancy was about 10%. That didn’t keep away four heavily armed bodyguards from the lobby 24/7. Breakfast was well populated by foreign arms merchants. And for some reason, there are always a lot of beautiful women hanging around with nothing to do.
The population is definitely getting war-weary. Nightly air raids across the country and constant bombings take their emotional toll. Kiev’s Metro system is the world’s deepest and, at two cents a ride, the cheapest. It’s where the government hid out during the early days of the war. They perform a dual function as bomb shelters when the missile attacks become particularly heavy.
My Look Out Ukraine has duly announced every incoming Russian missile and its targeted neighborhood. The buzzing app kept me awake at night, so I turned it off. Let the missiles land where they may. For this reason, I reserved a south-facing suite and kept the curtains drawn to protect against flying glass.
The sound of the attacks was unmistakable. The anti-aircraft drones started with a pop, pop, pop until they hit a big 1,000-pound incoming Russian cruise missile, then you heard a big kaboom! Disarmed missiles that were duds are placed all over the city and are amply decorated with colorful comments about Putin.
The extent of the Russian scourge has been breathtaking, with an epic resource grab. The most important resource is people to make up for a Russian population growth that has been plunging for the last century. The Russians depopulated their occupied territory, sending adults to Siberia and children to orphanages to turn them into Russians. If this all sounds medieval, it is. Some 19,000 Ukrainian children have gone missing since the war started.
Everyone has their own atrocity story, almost too gruesome to repeat here. Suffice it to say that every Ukrainian knows these stories and will fight to the death to avoid the unthinkable happening to them. There will be no surrender.
It will be a long war.
Touring the children’s hospital in Kiev is one of the toughest jobs I ever undertook. Kids are there shredded by shrapnel, crushed by falling walls, and newly orphaned. I did what I could to deliver advanced technology and $10,000 in cash, but their medical system is so backward, maybe 30 years behind our own, that it couldn’t be employed. Still, the few smiles I was able to inspire made the trip worth it. This is the children’s hospital that was bombed a few months ago.
The hospital is also taking the overflow of patients from the military hospitals. One foreign volunteer from Sweden was severely banged up, a mortar shell landing yards behind him. He had enough shrapnel in him, some 250 pieces, to light up an ultrasound and had already been undergoing operations for months. It was amazing he was still alive.
To get to the heavy fighting, I had to take another train ride a further 15 hours east. You really get a sense of how far Hitler overreached in Russia in WWII. After traveling by train for 30 hours to get to Kherson, Stalingrad, where the German tide was turned, is another 700 miles east!
I shared a cabin with Oleg, a man of about 50 who ran a car rental business in Kiev with 200 vehicles. When the invasion started, he abandoned the business and fled the country with his family because they had three military-aged sons. He now works at a minimum-wage job in Norway and never expects to do better.
What the West doesn’t understand is that Ukraine is not only fighting the Russians but a Great Depression as well. Some tens of thousands of businesses have gone under because people save during war and also because 20% of their customer base has fled.
I visited several villages where the inhabitants had been completely wiped out. Only their pet dogs remained alive, which roved in feral starving packs. For this reason, my major issued me my own AK47. Seeing me heavily armed also gave the peasants a greater sense of security.
It’s been a long time since I’ve held an AK, which is a marvelous weapon. It’s it’s like riding a bicycle. Once you learned, you never forget.
I’ve covered a lot of wars in my lifetime, but this is the first fought by Millennials. They post their kills on their Facebook pages. Every army unit has a GoFundMe account where doners can buy them drones, mine sweepers, and other equipment.
Everyone is on their smartphones all day long, killing time, and units receive orders this way. But go too close to the front, and the Russians will track your signal and call in an artillery strike. The army had to ban new Facebook postings from the front for exactly this reason.
Ukraine has been rightly criticized for rampant corruption, which dates back to the Soviet era. Several ministers were rightly fired for skimming off government arms contracts to deal with this. When I tried to give $10,000 to the Children’s Hospital, they refused to take it. They insisted I send a wire transfer to a dedicated account to create a paper trail and avoid sticky fingers.
I will recall more memories from my war in Ukraine in future letters, but only if I have the heart to do so. They will also be permanently posted on the home page at www.madhedfefundtrader.com under the tab “War Diary”.
Donating $10,000 to the Children’s Hospital
On the Front at Crimea with a Dud Russian Missile
A Gift or Piroshkis from Local Peasants
One of 2,000 Destroyed Russian Tanks
The Battle of Kherson with my Unit
This Blown Bridge Blocked the Russians from Entering Kiev
Good Luck and Good Trading,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
October 7, 2024
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or GOLDILOCKS ON STEROIDS, plus A KERFFUFLE IN PARIS),
(SPY), (FXI), ($COMPQ), (CCJ), (SLB), (OXY), (TSLA),
(TLT), (DHI), (NEM), (GLD), (TSLA)
The 6,000 targets for the S&P 500 are starting to go mainstream.
That was my forecast on January 1, back when everyone said I was nuts. The inflation rate is 2.2%, GDP growth is 3.0%, and interest rates are falling sharply, on their way to 3.0% by next summer.
Goldilocks is back, but this time she’s on steroids.
Also helping is that we are in the midst of a global interest rate decline. The US, Europe, China, and Australia are all cutting interest rates at the same time. Japan is the sole exception, which is on the verge of raising rates from 0.25%. All of this has a compounding effect on the health of the global economy.
Long-term market veterans like myself are amazed, astounded, and astonished that here we are on October 7, and instead of testing new lows for the year, we are punching through to new all-time highs. It’s proof that if you live long enough, you see everything.
Some five seconds after Jay Powell cut interest rates by a shocking 0.50%, everyone in the world suddenly realized they had way too much cash and not enough stocks. This is the kind of market you get from that realization, one that doesn’t breathe, take a break, have a correction, nor let in outsiders.
Further confusing matters is that we are witnessing the most contentious presidential elections in history. One party is proclaiming how great the US economy is, while the other is claiming it is the worst ever.
Those who believed the former description are having a great year. Those who bought the latter are having an awful one, with many owning no stocks at all. Fortunately, election concerns will disappear in four weeks not to return for four years. This is hugely positive for stocks.
But as all steroid users eventually find out, they cause impotence, sterility, and cancer, so enjoy while it lasts. That may be a mid-2025 or 2026 event.
China (FXI) came back with a vengeance. A 25% rise in a stock market in a week is not to be taken lightly, although a lot of this was short covering. Pouring gasoline on the fire is a government promise to buy $1 billion worth of stocks.
The question bedeviling all investors is whether China is a one-hit wonder or is it reborn again. I know that if this stimulus package doesn’t work, they have the resources to follow up with many more. But there is a bigger problem.
Chinese stock markets have not exactly done well since Xi Jinping came into power in 2013. In fact, they are exactly unchanged. During the same period, the (SPY) was up 308%, and the NASDAQ ($COMPQ) was up 525%. Many investors, like my old friend hedge fund legend Paul Tudor Jones, don’t want to touch China until Xi vacates the scene.
In any case, if you want to play China, the best risk-adjusted plays are not there but here in the US. Any US blue chip oil play (OXY) (SLB) would be a great choice, as China is the world’s largest oil consumer. Oil happens to be the cheapest and worst-performing sector in the stock market. And you don’t have to worry about a CEO getting rolled up in a carpet and disappearing for a few years, as has happened in the Middle Kingdom. At least here, you get all the US investor protections.
We closed out September with a blockbuster +10.28% profit. My 2024 year-to-date performance is at +44.97%. The S&P 500 (SPY) is up +19.92% so far in 2024. My trailing one-year return reached a nosebleed +62.77. That brings my 16-year total return to +721.60. My average annualized return has recovered to +52.32%.
With my Mad Hedge Market Timing Index at the 70 handles for the first time in five months, it was a good week to take profits. I sold longs in (CCJ) and (TSLA) and covered a short in (TLT). I stopped out of my long in (TLT) because of the blowout September Nonfarm Payroll Report on Friday.
This is what we’ve got left:
Risk On
(NEM) 10/$47-$50 call spread 10.00%
(TSLA) 10/$200-$210 call spread 10.00%
(DHI) 10/$165-$175 call spread 10.00%
Risk Off
NO POSITIONS 0.00%
Total Net Position 30.00%
Some 63 of my 70 round trips, or 90%, were profitable in 2023. Some 58 of 77 trades have been profitable so far in 2024, and several of those losses were really break evens. Some 16 out of the last 17 trade alerts were profitable. That is a success rate of +75.32%.
Try beating that anywhere.
September was Great, but October is Looking Tough, right on the doorstep of the November 5 election and the market waiting for another interest rate cut on November 6. I think I’ll run out the positions I have into the October 18 options expirations, then wait for the market to come to me. I am up too much this year to take on needless risk.
Nonfarm Payroll Report Comes in Hot, as US employers added 254,000 jobs in September, topping economists’ estimates. The payroll gain, the biggest advance since March, was led by leisure and health care. The headline Unemployment Rate fell to a three-month low of 4.1%.
Interactive Brokers Starts US Election Forecast Trading on the heels of a federal court ruling in their favor. The following Forecast Contracts on US election results will be available:
*Will Kamala Harris win the US Presidential Election in 2024?
*Will Donald Trump win the US Presidential Election in 2024?
Plus a dozen other election outcomes. The opening bids were 49% for Harris and 50% for Trump.
The port Strike is Settled with a 62% six-year settlement. The bananas were rotting. 54 container ships queued outside ports, risking shortages. The Strike cost the U.S. economy $5 billion/day. Shipping stocks tumble across Asia and Europe. Expect the US to move to full automation, where Europe went 30 years ago.
EC Imposes 45% Tariffs on Chinese EVs in a desperate bid to save the local car industry. The Commission, which oversees the bloc's trade policy, has said it would counter what it sees as unfair Chinese subsidies after a year-long anti-subsidy investigation, but it also said on Friday it would continue talks with Beijing. Expect the same to follow in the US.
A possible compromise could be to set minimum sales prices.
Hedge Funds Stampede into China on news that government agencies promised to pour $1 billion into local stock markets. Chinese equities saw the largest net buying ever from hedge funds last week, marking the most powerful weekly purchase on record, according to Goldman Sachs prime brokerage data.
Weekly Jobless Claims Climb to 225,000, not straying too far from a four-month low touched in the prior week. That is an increase from an upwardly-revised mark of 219,000 last week, data from the Labor Department showed on Thursday. Economists had anticipated 222,000.
Will This Crisis Take Gold to $3,000? Almost certainly, yes, given the way the barbarous relic traded yesterday. Buy all gold (GLD), plays on dips, the metal, ETFs, futures, and miners.
Tesla Bombs, with Q3 deliveries down flat, but the shares fell only 5%. Total deliveries came in at 462,890, while total production was 469,796. YOY Tesla is facing increased competitive pressure, especially in China, from companies like BYD and Geely, along with a new generation of automakers, including Li Auto and Nio.
US Car Makers Get Slaughtered, with Stellantis stock falling by double digits after the Jeep maker cut its 2024 financial guidance, citing deteriorating industry dynamics and Chinese competition. The warning, amid similarly negative news from other car makers, also dragged down shares of (F) and (GM). Avoid the auto industry except for (TSLA).
Nvidia Still has more to Run, so says Samantha McLemore, the founder and Chief Investment Officer of Patient Capital Management. Nvidia has been crushing every quarter for a year. CEOs want to make the decision to invest more [in AI] rather than getting caught behind. She doesn’t see the bull market ending soon. Current operating profit margins are 65%. Buy (NVDA) on dips.
My Ten-Year View
When we come out the other side of the recession, we will be perfectly poised to launch into my new American Golden Age or the next Roaring Twenties. The economy is decarbonizing, and technology hyper accelerating, creating enormous investment opportunities. The Dow Average will rise by 600% to 240,000 or more in the coming decade. The new America will be far more efficient and profitable than the old.
Dow 240,000 here we come!
On Monday, October 7 at 8:30 AM EST, Used Car Prices are out
On Tuesday, October 8 at 6:00 AM, the NFIB Business Optimism Index is released.
On Wednesday, October 9 at 11:00 PM, the Fed Minutes from the last meeting is printed.
On Thursday, October 10 at 8:30 AM, the Weekly Jobless Claims are announced. We also get the Consumer Price Index.
On Friday, October 11 at 8:30 AM EST, the Producer Price Index and the University of Michigan Consumer Price Index are announced. At 2:00 PM, the Baker Hughes Rig Count is printed.
As for me, dentists find my mouth fascinating as it is like a tour of the world. I have gold inlays from Japan, cheap ceramic fillings from Britain’s National Health, and loads of American silver amalgam, which are now going out of style because of their mercury content.
But my front teeth are the most interesting as they were knocked out in a riot in Paris in 1968.
France was on fire that year. Riots on the city’s South Bank near Sorbonne University were a daily occurrence. A dozen blue police buses packed with riot police were permanently parked in front of the Notre Dame Cathedral, ready for a rapid response across the river. They did not pull their punches.
President Charles de Gaulle was in hiding at a French air base in Germany. Many compared the chaos to the modern-day equivalent of the French Revolution.
So, of course, I had to go.
This was back when there were five French francs to the US dollar, and you could live on a loaf of bread, a hunk of cheese, and a bottle of wine for a dollar a day. I was 16 years old.
The Paris Metro cost one franc. To save money, I camped out every night in the Parc des Buttes Chaumont, which had nice bridges to sleep under. When it rained, I visited the Louvre, taking advantage of my free student access. I got to know every corner. The French are great at castles….and museums.
To wash, I would jump in the Seine River every once in a while. But in those days, not many people in France took baths anyway.
I joined a massive protest one night, which originally began over the right of men to visit the women’s dorms at night. Then the police attacked. Demonstrators came equipped with crowbars and shovels to dig up heavy cobblestones dating to the 17th century to throw at the police, who then threw them back.
I got hit squarely in the mouth with an airborne projectile. My front teeth went flying, and I never found them. I managed to get temporary crowns, which lasted me until I got home. I carry a scar across my mouth to this day.
I visited the Left Bank again just before the pandemic hit in 2019. The streets were all paved with asphalt to make the cobblestones underneath inaccessible. I showed my kids the bridges I used to sleep under, but they were unimpressed.
But when I showed them the Mona Lisa at the Louvre, she was as enigmatic as ever. The kids couldn’t understand what the fuss was all about.
Everyone should have at least one Paris in 1968 in their lifetime. I’ve had many and am richer for it.
Stay Healthy,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
1968 in Paris
2019 in Paris on Top of the Eiffel Tower
Global Market Comments
September 30, 2024
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or CHINA IS BACK! plus MY ENCOUNTER WITH ALIENS),
(GLD), (CCJ), (NEM), (TSLA), TLT), (DHI), (FXI), (BIDU), (TNE)
(USO), (BTU), (UNG), (CORN), (WEAT), (SOYB), (LVS), (WYNN) (LVUY) (HESAF)